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Ukraine’s lack of liquidity means too much risk for investors

Ukraine annually consumes about 31 billion cubic metres of gas, 21 of which are produced locally. Therefore, also due to current State regulations, the volumes on the exchange are limited.

For Iryna Mykhaylenko, Head of the trading division at Naftogaz there is a huge pressure because of the high energy prices, especially for a country like Ukraine which has 18.6 bcm of storage.

“Everybody wanted to liquidate in the first quarter because, in the second one, prices were almost half,” she said speaking at the ETCSEE conference which took place in Prague.


For Sergii Onyshchuk, Managing Director of Axpo Ukraine, this storage could be seen as a strategic asset for neighbouring countries and, at the same time, an opportunity but under this particular situation is too risky, from a credit perspective and from an export perspective.

Despite most of the volume traded coming from Naftogaz, Mrs Mykhaylenko mentioned the local market as a challenge. “A lot of extra work must be done by Ukrainian exchanges,” she said.

Mr Onyshchuk is also is looking at the export as a challenge.

“There is a distortion of the market: we don’t see a lot of liquidity in the exchanges now and local production is ready to give a huge discount so there is no commercial reason to keep European gas in Ukraine,” he said. “Therefore, regulatory stability is important.”

Source: Ukrainian energy Exchange.

Following these comments, Ukrainian Energy Exchange’s development manager Lisse Geert van Vliet said that there are several ways leading to the solution of this problem and there is no quick solution. He emphasised that the design of the market is correct, but the last thing to do is to have the margin buy and sell price calculated based on the exchange prices of short-term standardised products.

According to him, today large foreign traders are already trading participants in the short, medium and long-term natural gas market. To do this, they need to register an enterprise in Ukraine. Moreover, UEB is making efforts to expand the opportunities of the Ukrainian market for foreign traders – it is trading in natural gas, which is stored in the customs warehouse mode in underground storage facilities and in the customs warehouse mode with the simultaneous use of the short-haul service.

Mr van Vliet also emphasised the importance of the exchange for building and developing markets, as well as their integration. To this end, UEB is taking part in the SEEGAS project, which is designed to unite the markets of the countries of Southeast and Eastern Europe for joint gas trading within the same trading space with subsequent integration into the single European gas market.

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